Department A had 10,000 units in work in process that were 30% converted at the beginning of the period at a cost of $10,000. During the period, 15,000 units of direct materials were added at a cost of $60,000, 16,000 units were completed, and 9,000 units were 40% completed. The first in, first out method is used and all materials are added at the beginning of the process. Direct labor was $30,000, and factory overhead was $60,000 during the period.

Question

Department A had 10,000 units in work in process that were 30% converted at the beginning of the period at a cost of $10,000. During the period, 15,000 units of direct materials were added at a cost of $60,000, 16,000 units were completed, and 9,000 units were 40% completed. The first in, first out method is used and all materials are added at the beginning of the process. Direct labor was $30,000, and factory overhead was $60,000 during the period.

1. What is the number of equivalent units of conversion for the perod? 12,600

2. What is the tontoal conversion costs for the period? $90,000

3. What was the conversion cost of the units started and completed during the period?

4. What was the converision cost of the 9,000 units in process at the end of the period?

Answer 1

A fast-food establishment is thinking of buying a new cooking grill and refrigeration unit. The costs of these new machines are $12,500 and $9,000, respectively. The installation costs of the new equipment will run about $800. It is estimated that 10% more customers can be served with the new equipment, which would mean an additional annual net cash flow of approximately $4,500. The salvage value of the old grill and refrigeration unit is estimated to be $1,000.

The firm's cost of capital is 12%. The equipment should last 10 years, at a minimum.

Answer 2

To answer questions 3 and 4, we need to determine the conversion cost per equivalent unit. Let's go step by step:

Step 1: Calculate the equivalent units of direct materials added during the period:
- 16,000 units completed * 100% conversion = 16,000 equivalent units
- 9,000 units in process * 40% conversion = 3,600 equivalent units
Total equivalent units of direct materials = 16,000 + 3,600 = 19,600

Step 2: Calculate the equivalent units of conversion for the period:
- The 10,000 units in process at the beginning with 30% conversion make up (10,000 * 30%) 3,000 equivalent units.
- Add the 3,600 equivalent units from step 1.
Total equivalent units of conversion = 3,000 + 3,600 = 6,600.

So, the number of equivalent units of conversion for the period is 6,600 (answer to question 1).

Step 3: Calculate the total conversion costs for the period:
- Conversion cost per equivalent unit = Total conversion costs / Equivalent units of conversion
= $90,000 / 6,600
= $13.64 (approx.)

Therefore, the total conversion costs for the period is $90,000 (answer to question 2).

Step 4: Calculate the conversion cost of the units started and completed during the period:
- Conversion cost per unit = Total conversion costs / Total units started and completed
= $90,000 / 16,000
= $5.63 (approx.)
- Conversion cost of units started and completed during the period = Conversion cost per unit * 16,000
= $5.63 * 16,000
= $90,080 (approx.)

So, the conversion cost of the units started and completed during the period is approximately $90,080 (answer to question 3).

Step 5: Calculate the conversion cost of the 9,000 units in process at the end of the period:
- Conversion cost of the 9,000 units in process = Conversion cost per unit * Equivalent units of conversion in process
= $5.63 * 3,600
= $20,268.00

Therefore, the conversion cost of the 9,000 units in process at the end of the period is $20,268.00 (answer to question 4).